Britain can be a big hitter and stay out of the euro, insists Blair

Britain can remain an important player in the European Union even it stays outside the single currency, Tony Blair insisted yesterday.

The Prime Minister's remarks deepened the confusion over the Government's stance on the euro and undermined the arguments for entry made in recent days by various pro-European ministers.

In an interview with the Italian newspaper La Repubblica, Mr Blair said Britain could be a leading player in the EU in "fundamental sectors" such as defence, economic reform and environmental protection while it was outside the euro.

"I believe the UK can be a leading partner in Europe,'' he said. "Joining the euro is a separate issue.'' He predicted the debate in Britain over whether to join the euro would intensify in the coming months. Mr Blair's comments appeared to be at odds with statements by ministers since euro notes and coins were launched just over a week ago.

Peter Hain, the Europe minister, warned on Sunday that Britain would lose investment projects by foreign companies as well as influence in the EU if it put off a decision on joining the single currency. He told BBC Radio 4: "The Dutch, for example, told me that they are fighting to keep us in the inner councils of economic decision-making in the European Union because they expect us to come in. If they got the signal that we were not serious about coming in the nearish future then they would no longer be able to hold the ring on that."

Robin Cook, the Leader of the Commons, said on BBC Television: "It is clear that we are gaining a lot as Britain from the leading role we have in Europe... If we want to continue with that very strong, powerful, leading role within the EU, then it's going to be more challenging to do that if we're outside the inner club."

Yesterday, Downing Street sought to end the confusion over whether the decision on euro entry would be taken on economic or political grounds.

Mr Blair's official spokesman claimed the press had been playing "euro hokey-cokey" in recent days, with conflicting reports about the Government's intentions. "We are committed in principle to joining a successful single currency. In practice, the economic tests have to be met," he said. "Self-evidently, any decision to call a referendum would be a political decision, in as much as it would be made by politicians. But we will only recommend doing so, and obviously Parliament will have to have its say as well, if it is clearly and unambiguously in Britain's economic interests to do so."

Number 10's statement was seen by some Labour MPs as an attempt to loosen the Treasury's grip on the crucial decision. The Chancellor, Gordon Brown, has insisted that the Treasury is the "guardian" of the five tests, but pro-euro ministers have raised the prospect of taking a political decision to recommend entry if the economic assessment is not totally conclusive.